Washington’s Infernal Inflation Machine is a prosperity wrecker, an assailant of wage workers, savers and retirees, a propellant of unhinged speculation, the driving force behind soaring wealth inequality and the handmaid of Big Government and its liberty-suffocating ministrations. That is, it’s the primordial force bringing the curtains down on the American Dream as we once knew it.
But among its manifold ills, surely its corrosive effect on middle class living standards is one of the most pernicious. There is perhaps no better way to illustrate this unfortunate truth than with this 73-year look at the real (inflation adjusted) purchasing power of manufacturing wages.
In a word, prosperity came to a screeching halt in this core precinct of the US economy more than four decades ago in 1978. The “before” and “after” trend represented by the blue line in the chart is palpable.
Thus, between 1947, when the war-economy had transitioned to peacetime footing, and 1978, when inflation finally engulfed manufacturing worker paychecks, real hourly wages rose by nearly 95%. That represented at 2.2% per annum gain in real purchasing power, year-in-and-year-out for 31 years. And it happened notwithstanding six mildish recessions during that span.
It is exactly the steadily climbing blue line on the left-hand side of the chart that embodied the vaunted post-war American prosperity and the rise of middle class living standards like never before experienced.
But, alas, that’s all she wrote. Between February 1978 and the pre-Covid peak in February 2020, real manufacturing wages declined by –6.5%, mainly oscillating slightly higher and lower with the unfolding of the business cycle.
Indeed, even after real manufacturing wages stabilized after 2000, the per annum gain through February 2020 was just 0.23%. That’s exactly one-tenth of the per annum gain recorded during the golden era of post-war prosperity thru 1978.
Average Real Hourly Earnings, Manufacturing, 1947-Feb. 2020
Nor is this just a case of the off-shoring impact on manufacturing wages, even though manufacturing jobs did back then and still do represent the premier pay opportunities for the broad extent of hourly wage jobs in the US economy.